TROUBLES at Barclays have dominated headlines over the past week but everyone concerned in this saga has been well aware this is not the only British bank to have stepped over the line – morally and possibly criminally – in the dishonest fixing of key inter-bank interest rates.
As we explain in our coverage today, the Royal Bank of Scotland is also under investigation by the regulatory authorities for similar transgressions and, according to some sources, could face fines of around £150 million. The Barclays controversy is already a massive scandal, calling into question the professional standards of an entire industry. Any fines imposed on RBS will add fuel to an already incendiary mix, for the simple reason that RBS is majority-owned by the British taxpayer. Fines – the bulk of them to US regulators – would effectively be met from public funds that are already struggling to pay the salaries of midwives, teachers and police officers as the recession tightens its grip.
If there was any development in the banking saga that could possibly sour even further the public’s assessment of the country’s senior bankers, this is it. First their greed and recklessness precipitated a global credit crunch that required unprecedented bailouts and international austerity measures. Then they refused to address the obscene bonus culture that rewards the very recklessness that took the world into this mess (or, worse, pays bonuses with little regard to whether or not they are deserved). Add into this the simple incompetence demonstrated by RBS last week when its holes-in-the-wall were unable to provide its customers with their own cash, and thousands of businesses and individuals were unable to pay their bills, and it is hard to think of a more perfect combination of arrogance, haplessness and mendacity.
So how should we go about addressing this dismal array of problems? The excuses used by Barclays chief executive Bob Diamond to parry calls for his resignation are threadbare. This was no one-off instance of sharp practice, or a case of an individual succumbing to an isolated temptation. This was done within a cut-throat culture that enjoyed his endorsement, and carried on for years. It is hard to avoid the conclusion that in some departments of Barclays and other banks, business was transacted according to rules in which normal morality – do not lie; do not cheat; play by the rules – came a poor second to personal and corporate enrichment. Diamond should resign; and those further down the food chain who were personally involves in this grubby little scam should face the full weight of the criminal justice system.
Labour leader Ed Miliband has called for a public inquiry into banking practices – a kind of Leveson Inquiry for the financial sector. This route has its attractions, and is commensurate with public anger. But there is a danger such an inquiry – by its very nature far more complex than the one into the media – would drag on for years, get bogged down in detail and merely delay the action necessary to get Britain’s banks back on track. Instead of an inquiry, what the sector needs is for every stakeholder – the government, regulators, prosecutors, shareholders, non-executive directors and top executives themselves – to review working practices and compliance systems to enforce a new sector-wide regime of zero tolerance for dishonesty. The disinfecting of the financial world has to start here.
Moore should stay
There are too few women at the highest level of politics. Of that there is no doubt. So it would be good if David Cameron and Nick Clegg used this summer’s cabinet reshuffle to bring more women to the top table, as male ministers who have underperformed are ditched. The key word here, however, is “underperformed”. As we reveal today, there are some people in the coalition government who would like to move Michael Moore from his position as Scottish Secretary and replace him with his fellow Scottish Lib Dem MP, Jo Swinson. This, so the logic goes, would freshen up the government and help its gender balance.
This newspaper disagrees. It may well be the case that Swinson deserves her place in cabinet, but it should not be at Moore’s expense. The Scottish Secretary is not the world’s best communicator – some of his performances in front of the TV cameras have been stilted and clumsy. But Moore has played a crucial role in tempering some of the more cavalier attitudes to Scotland that exist on the Conservative side of the coalition. After sources close to George Osborne threatened that Westminster would hold its own referendum on Scottish independence, usurping the Scottish Government, it was Moore who calmed the waters. Some posturing aside, he has conducted himself well in negotiations with Holyrood. At this key juncture, he is the right person for the job.